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Can Wireless Strength Drive Verizon's (VZ) Q3 Earnings?

Zacks Equity Research

Verizon Communications Inc. VZ is scheduled to release third-quarter 2019 results before the opening bell on Oct 25. In the last reported quarter, adjusted earnings beat the Zacks Consensus Estimate by 3 cents.

Verizon is likely to have recorded higher year-over-year revenues from the Wireless segment, which accounts for lion’s share of total revenues.

Factors at Play

During the third quarter, the telecom behemoth launched 5G Ultra Wideband network in select locations of Atlanta, Detroit, Indianapolis, Washington DC, Phoenix, St. Paul, New York City, Panama City and Boise to bring the tally of mobility service cities to 13. Also, Verizon launched its fifth 5G-enabled device — Inseego Corp.’s MiFi M1000 — that combines large bandwidth and fast download speeds for data-extensive applications. These are expected to be reflected in the third-quarter results.

The company has aggressively expanded its fiber optics networks to support 4G LTE and upcoming 5G wireless standards as well as wireline connections, which is likely to have translated into healthy segment margin for the quarter.

Buoyed by such tailwinds, the Zacks Consensus Estimate for the Wireless segment’s operating revenues for the to-be-reported quarter is currently pegged at $23,437 million, up 2% from the year-ago reported figure of $22,973 million. The higher revenue expectations can be attributed to an uptick in demand and an upgrade to state-of-the-art infrastructure.

Total revenues for the company are expected to be $32,715 million. It generated revenues of $32,607 million in the prior-year quarter. The Zacks Consensus Estimate for earnings is currently pegged at $1.24 per share, up from $1.22 reported in the year-earlier quarter.

Key Developments in Q3

During the third quarter, Verizon decided to wind up the operations of news channel Fios1 (Fiber Optic Service) News, which is one of the two hyperlocal cable-news channels serving New York City’s metro area. The company also announced plans to divest the social media blogging site — Tumblr — for an undisclosed amount, to San Francisco-based web developer firm Automattic Inc. in order to focus on core assets that centered on premium original content. Moreover, the company offered a voluntary severance package to about 44,000 employees to trim its workforce by about 30%. The moves are aimed to reduce operating costs by $10 billion by 2021.

Earnings Whispers

Our proven model predicts an earnings beat for Verizon in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Verizon Communications Inc. Price and EPS Surprise


Verizon Communications Inc. Price and EPS Surprise

Verizon Communications Inc. price-eps-surprise | Verizon Communications Inc. Quote

Zacks Rank: Verizon has a Zacks Rank #2.

Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

AT&T T is set to release quarterly numbers on Oct 28. It has an Earnings ESP of +0.50% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for T-Mobile US, Inc. TMUS is +0.55% and it carries a Zacks Rank of 2. The company is set to report quarterly numbers on Oct 28.

The Earnings ESP for Sprint Corporation S is +27.78% and it carries a Zacks Rank of 3. The company is likely to report quarterly numbers on Oct 30.

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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
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